Insuring Your Private Whisky Collection
30th April 2017 Melanie Corbett, Brighti
Many investors are now seeking alternative investments for their own personal portfolios, so here's some good advice for the 'Dram Busters' who invest in whisky.
There’s no denying the economic effect and reach of the Scotch Whisky Industry. With about 1.2 billion bottles of Scotch whisky being produced and sold every year, the industry employs (directly and indirectly) 40,000 people and generates 25% of British food and drink exports*.
Before tax it is worth £4.5bn a year to the UK economy (according to figures published by Whiskey Invest Direct), plus an additional £3bn a year in tax receipts for the British government.
Whisky is distilled beer. All types/brands are undrinkable when it is first distilled, and must be matured to become drinkable, for a minimum of 3 years, although the average is 9 years. For all whiskies sold, their age [time spent in a barrel, not a bottle] indicates quality, and older whisky commands higher prices. Over time its value increases, in fact unlike most goods, whisky becomes more valuable the older it gets. This is a peculiar economic phenomenon, as we expect things to be generally cheaper the older they get. This anomaly, combined with the instability of financial markets, means we are seeing an ever-increasing trend for people to put their money in to Whisky and wine.
October 2016 saw the most expensive bottle of malt ever sold at auction in Scotland. The rare bottle of Glenfiddich single malt whisky was sold by Bonhams, Edinburgh, for £68,500.
Whilst the value of Whisky rose more than 400% between 2008 and 2011, it cannot be viewed as a normal ‘financial instrument’ because it is a very tangible ‘good’, but it does have the added bonus that if your investment goes wrong you can always drink it!
You have lovingly acquired a fantastic collection of whisky or wine over many years and you may want to consider insuring your investment.
You may assume that your whisky or wine collection will be insured under your home contents policy, and whilst there may be insurance coverage built in to your current programme, we would urge you to check the wording carefully, particularly a thing called a ‘single article limit’.
This is the maximum the policy will pay out for any one item and this is likely to be around £2,000.
High Value household policies differ in their coverage and Bright I can provide you with a variety of options, including separate insurance for the collection in isolation with a specialist insurer and product wording/coverage.
Here are some guidelines to insuring your whisky or wine collection
- Don’t assume the collection will be covered under your general home contents policy, engage with a specialist broker to discuss your needs. It may be worthwhile for you to take out specific whisky or wine insurance.
- Create an inventory, photograph and catalogue every bottle, endeavour to maintain this inventory, when you make purchases or disposals. Typically, the sampling of a bottle renders its insurance coverage expired, and it should be removed from the inventory.
- Ensure you get the collection valued. A good specialist will create a detailed inventory for you with photographs of every bottle to save you the job of #2 above
Why consider a specialist coverage?
Any collection needs to be carefully and properly stored. Whisky or wine is no exception and whilst keeping these items out of sunlight and in a cool, dry place, off the floor, are obvious precautions, there are other things to consider.
Many collections are kept in basements, but these can flood and this may result in the labels coming loose from the bottle. A specialist policy will not only cover any diminution of value as a result but will also cover the costs of restoration of the labels. You would not expect a standard insurance programme to deliver this quality of coverage, or perhaps any coverage at all as the contents of the bottle remained undamaged.
A specialist policy would be Worldwide in nature and would ensure that your whisky is covered, no matter where it is. You could have your collection at home or in a bonded warehouse.
New purchases are covered automatically for 60 days, allowing you time to tell your Insurance Broker and paying the additional premium (if applicable).
That said, even Specialist policies carry exclusions including gradual deterioration, insects, vermin, mildew, fungus, action of light etc., so do read your policy wording very carefully to ensure you know what you are and are not covered for.
If your passion is building a lucrative collection of vintage fine wines and whiskies then it is important to receive comprehensive, personal guidance on protecting your investment.
About the Author - This article was written by Melanie Corbett, Client Director at bright I brokers Limited. For more information please contact her on Melanie.Corbett@brighti.insure or give her a call on 07553 939139 or visit their website at www.brighti,insure